Dominique de Kevelioc de Bailleul: â€śThe incredibleÂ gold scandal,â€ť the German newspaperÂ BILD began its article about the disposition of Germanyâ€™s mysteriousÂ gold holdings following the collapse of Lehman Brothers in 2009.
Growing pressure from the German people and politicians exerted upon itsÂ centralÂ bank, the Bundesbank, to audit the nationâ€™sÂ gold reserves intensifies, running parallel with escalating anxieties felt by GermanÂ taxpayers for more than two years leading up to Greeceâ€™s to-big-to-pay $18Â billion interest payment deadline of March 20, 2012.
Considering the ominous Greek sovereign debt backdrop, a suspicious GermanyÂ now wants to know where its gold is stored, as the last audit made in 2007 clearly indicates that the Bundesbank skipped its 2010 audit.
Just as pressure has been applied on the Fed by U.S .Rep. Ron Paul to agreeÂ to an audit of U.S. Treasury gold held at Ft. Knox and West Point, Germany mayÂ have to break the rules, too, by stonewalling the countryâ€™s electedÂ representatives on the matter of its gold reserves.
â€śA clear breach of the law,â€ť top Bilanzrechtler Prof. JĂ¶rg Baetge told BILD. â€śAt least every three years to control counts the bars are made. [GoogleÂ translation]â€ť
When Germanyâ€™s controversial member of the Bundestag, Phillip Missfelder,Â inquired into the reason for the missed audit by the Bundesbank, theÂ 32-year-oldÂ chairman of the Junge Union received a series of Fed-likeÂ responses from Germanyâ€™s central bank.
â€śI was shocked,â€ť Missfelder told BILD.Â â€śFirst they said that there wasÂ no list.Â Then there were lists that are secret.Â Then I was told,Â demands endanger the trust between alliance bank and the Fed. [GoogleÂ translation]â€ť
A skipped audit, and now, peculiar responses from one of the most respectedÂ central banks, regarding the worldâ€™s second-largest sovereign gold stockpile (afterÂ theÂ UnitedÂ States) has gold bugs wondering if German gold has beenÂ essentially held hostage at the NY Fed to prevent another explosive run in theÂ goldÂ price.
Coincidentally, or not, some traders suspect that Venezuelaâ€™s Hugo Chavezâ€™sÂ repatriation of 99 tons of gold from London vaults created a nearly 25 percentÂ jump in price during the un-seasonal summer rally in gold of last year.
But in the case of Germanyâ€™s (NYSEarca:EWG)Â 3,401 tons, of which approximately 60 percentÂ (2,000 tons) is rumored to be stored outside of Frankfurt, a potential move inÂ theÂ goldÂ pricefrom an unwind of 20 times more potentially re-hypothicated goldÂ (levered as much as 100:1) could take out gold $5,000, $10,000, $20,000 or more,Â easily, if Germany insisted that its gold (possibly rehypothicated) be returnedÂ to its own vaults.
A leveraged gold market of approximately 100:1 would, in effect, translate toÂ 200,000 tons (2,000 x 100) removed from the gold market (or any fraction of thatÂ amount).Â That cannot happen without a total and immediate implosion of theÂ worldâ€™s Western fiat currencies (in terms of gold).Â Itâ€™s too much gold toÂ unwind and continue on the facade of viable Western fiat currencies.
Therefore, German gold moving back to Germany wonâ€™t happen.Â Londonâ€™sÂ scramble to find 99 tons for Chavez is one thing; finding as much as 2,000 tonsÂ to ship to Frankfurt is quite another.
Missfelder told BILD, â€śIt may be that is the gold assets of the GermanÂ apparently violate any applicable accounting law.Â This is a case forÂ Parliament.Â I call for a clear view. [Google translation]â€ť
Aside from the heat that Germany has taken for more than two years in itsÂ fight against pledging its countryâ€™s people as collateral for Greek fiscalÂ profligacy, Germany has another, even bigger problem.Â That is: how toÂ repatriate German gold without destroying all hope of keeping the post-BrettonÂ Woods fantasy alive.
Will Germany ultimately take the big hit at the endgame of dollarÂ hegemony?
Author ofÂ Currency Wars, Jim Rickards, believes that German goldÂ has, de facto, been confiscated, already.Â If any mention from the officialdom in Berlin that it seeks to repatriate its gold reserves could forceÂ Washingtonâ€™s hand to refuse the request and confiscate the up-to 2,000 tons ofÂ gold held at the NY Fed.
â€ś . . . as Iâ€™ve described in the bookÂ Currency Wars, if the U.S.Â gets into extreme distress, and thereâ€™s a collapse in the dollar, I have noÂ doubt that in an emergency basis the U.S. will basically confiscate all the gold in their possession,â€ť Rickards told King World News in mid-November.Â â€śThenÂ they will convert it to back up a new gold based U.S. dollar as plan B or someÂ way to stop the crisis.â€ť
Rickards continued, â€śSo itâ€™s a political question for Germany as to whetherÂ they want their gold back, but sometimes you donâ€™t ask questions if you donâ€™t think you are going to like the answer.Â It would be interesting if GermanyÂ demanded that gold be shipped to Frankfurt or Berlin what the U.S. wouldÂ say.â€ť